Indonesia's tightening corn supply amid lower domestic output, coupled with delays in Black Sea feed wheat shipments due to Red Sea tensions, is plaguing the country's feed millers and likely to keep poultry supply tight in the near term, according to sources.
With domestic feed corn prices already being up in the week to Jan .19 amid lower corn production, and offers heard at Rupiah 10,500/kg ($672.30/mt) delivered to feed mills around Jakarta, farmers and feed millers are looking for alternative solutions to cover for shortages. This has included buying imported feed wheat through state-owned livestock company Berdikari, with most of the imported feed wheat slated to come from the Black Sea.
Platts, part of S&P Global Commodity Insights, assessed corn CFR Northeast Asia at $242.50/mt Jan. 18, down $6/mt on the week.
According to Indonesia's Central Bureau of Statistics, the country's corn production is likely to continue dropping over January-February to about 560,000 mt, down from 1.17 million mt in November and 0.89 million mt in December.
"We have to wait for the Central Java crop, which is coming earlier this year with decent production expected. However, East Java is very dry, and production is not looking good," a domestic trader said.
Although the national logistics agency Bulog is expected to tap into the import market again to secure a second tranche of 250,000 mt of feed corn, market sources have not received any updates in the week ended Jan. 19. Previously, the national logistics agency Bulog stepped into the international market to import close to 250,000 mt of feed corn in October 2023 for distribution amongst poultry farmers to alleviate the corn shortage domestically.
However, feed millers are now facing shipment delays of feed wheat due to heightened tensions in the Red Sea, exacerbating the tightness in raw material supply.
"We are facing a lot of [feed wheat] delivery problems here, so some feed millers are even running at only 30% capacity," said a source in the local feed milling industry.
Impact on downstream sectors
Lower feed mill output, coupled with delayed shipments, could keep poultry supply tight leading up to Ramadan and the festive period of Eid al-Fitr over March-April, sources said.
Some poultry industry integrators are reportedly slashing chicken life cycles due to a lack of feed inputs, also leading to higher chicken prices.
"By harvesting the chickens early, the supply of big chickens will drop. We see the impact on chicken price already. It's up by Rupiah 19,000/kg now," added the same source.
Broiler chickens are usually slaughtered for sale in two stages, with some being slaughtered upon reaching 1.5 kg in weight to free up farming space and others culled at 3 kg to achieve an average weight of 2 kg/farm.
Feed mills' inventories have been also affected as the grain shortage has squeezed their stocks, with some only holding one week's worth of inventory for corn and wheat.
"The situation has forced some feed mills to stop operations and pick selective customers to sell their compound feed to," said an Indonesian feed miller. "Everyone is chasing complete feed, so concentrate feed demand will be lower," the feed miller added, indicating soybean meal demand will be affected as well even if it was not the limiting factor in this situation.
The situation could also result in higher feed corn and grain prices in Indonesia in the near term, according to market sources.